Yufu Co., Ltd. is one of the leaders in the domestic polyester industry, and its main business is growing steadily. After changing the actual controller in April 2016, the company completed the acquisition of 51% of the shares of the automotive power battery company Jiangsu Zhihang New Energy Co., Ltd. (hereinafter referred to as “Zhihang New Energy”) with 1,09.8 billion yuan in cash in September 2016, and extended into the NEV industry chain. Zhihang New Energy is one of the main battery suppliers for new energy logistics vehicles, and its production capacity and technical strength rank among the highest in the country. The 2016-2018 performance promises reached 136 million yuan, 380 million yuan, and 4.2 billion yuan respectively, which is expected to greatly increase the performance of listed companies while also becoming an effective vehicle for the company's efforts in the field of new energy vehicles. We are optimistic about the company's future development. For the first time, we have given a “buy” rating, with a target price of 27.5 yuan. The main points supporting the ratings are driven by the new energy vehicle industry. The dark horse of power batteries has risen, and the development trend of new energy vehicles is strong. Demand for power batteries will continue to grow rapidly, and the penetration rate of ternary battery technology has accelerated markedly. Zhihang New Energy was selected in the fourth batch of “Specification Conditions for Automotive Power Batteries” in 2016. Currently, it has an effective production capacity of 500,000 2.6Ah power 18650 batteries per day (about 1.6 GWh). In addition, the PACK production line has also been officially put into operation, with a current production capacity of 600 sets/month. Zhihang New Energy is one of the main battery suppliers for new energy logistics vehicles. The shipment volume of 18650 power batteries is among the highest in the industry. Major customers include Dongfeng Motor and Zhongzhi Automobile. Zhihang New Energy has an excellent scientific research team and strong independent innovation capabilities. It has the potential to further expand to square or soft-pack batteries in the future; the production line equipment is advanced, the industrial chain is fully equipped, and it has the capacity to produce lithium battery cathode materials with an annual output of 10,000 tons. Consolidate traditional industrial yarn business and provide good performance support After years of rapid expansion of production capacity, the polyester industrial yarn industry has now entered a period of steady development, while domestic demand has shown an accelerated growth trend in the past three years. The company is one of the leaders in the domestic polyester industry. The second phase of the “200,000 tons of differentiated polyester industrial yarn project” was successfully put into operation in 2016 with a production capacity of 60,000 tons, with an effective production capacity of 300,000 tons/year. The business is expected to maintain an average annual growth rate of about 15%. The main risk facing ratings is that the NEV policy falls short of expectations; overcapacity in power batteries has led to a sharp drop in prices. Valuation We predict that under the current share capital, the company's net profit for 2016-2018 will be 173 million, 351 million and 682 million yuan respectively, with year-on-year growth rates of 66.3%, 102.9% and 94.3% respectively, and earnings per share of 0.42, 0.85 and 1.66 yuan respectively. First coverage, giving a buying rating, with a target price of 27.5 yuan.